The plastic he was going to use to line the coop with is more expensive than he thought. They have a cheap masonite with some kind of paint covering on one side.. is the suitable for the inside walls? I thought i read somewhere that there was a problem with Masonite.. but I cant find it now.

I would think the coated masonite woud be great. With that nice glossy surface it will be really easy to keep clean, and the light color will really brighten up the interior of the coop. I can't recall ever having heard of any problems with using masonite for interior use.
db